Several franchisees urged members of Congress Monday to help reverse a recent federal rule change which could destroy many small businesses.
A federal labor case involving Browning-Ferris Industries has allowed the National Labor Relations Board (NLRB) to expand a critical franchising and contracting rule. Known as the joint-employer standard, the rule helps establish which company has responsibility over employees when multiple companies contract with one another.
“Simply put, I believe the NLRB is taking aim at the franchise model and trying to destroy it,” Edward Rothschild, owner of Alphagraphics, said on a call with reporters. “I think it will hurt the employee base.”
The call was organized by the Coalition to Save Local Businesses. The group consists of thousands of local businesses from across the country who are trying to stop the NLRB. Much of its efforts involve speaking with Congress and the American people about the labor board overreach. The coalition hopes Congress will help in reversing the decision.
“We must, we have to work together to stop this decision,” Mara Fortin, owner of Nothing Bundt Cakes, said. “The result for sure will hurt my employees.”
Franchising is a unique form of contracting. It allows a small business to contract with a large corporation, like McDonald’s, so that it can to use its brand name and sell its products. Though the small company has to accept its own risk, it gets to run its business the way it wants. This while having the backing of a well-known brand and products.
“The decision overrides contractual agreements,” Rothschild also noted. “The NLRB seems to be saying I am no longer my own business.”
The problem is, when a corporate brand name gets declared a joint-employer with the small business it contracts with it must accept responsibility for the actions of that operation. Critics argue this will likely result in corporations being less likely to participate in the franchise model or asserting more control over the small businesses they contract with.
“The last thing I thought was I would have to defend myself and business against the government,” Fortin said. “We will no longer be in charge of the business we worked so hard to build.”
Even though Republican members of Congress have already shown a willingness to help, they are likely to face major challenges. President Barack Obama has successfully prevented lawmakers from stopping the NLRB in previous decisions. In March, Senate and House Republicans voted on a resolution to overturn a new union election rule from the NLRB. The president, however, was quick to veto it.
Since announcing its interest in revisiting the standard last year, many lawmakers and business leaders became immediately concerned. The NLRB has defended the potential changes. It argued in the McDonald’s case that franchisors often times have too much control over the independent franchisees they contract with for them to be consider their own operations.
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